Bankruptcy - Transferring the equity in the home to your wife or husband - Yes, you can transfer your equity in your home to your husband or wife pre or post bankruptcy provided you follow the rules discussed below.
When you have reviewed the "determining your share of the equity" section of this website and have all of the relevant documents to hand, you now have the information to be able to transfer the equity in your house and home to your spouse before bankruptcy. It would be dangerous to do this however, without specific advice.
You are able to undertake such a transfer either pre or post bankruptcy.
To transfer the equity pre bankruptcy, you have to effectively "sell" your share of the equity in your house to your spouse. This will involve your spouse raising an amount of money either through a re-mortgage or your spouse raising an unsecured loan to purchase your share of the equity in the house.
If there is "negative equity" in the property you may wish to do one of two things.
- You may wish to hand the keys back. If so, the full amount of any loss the mortgage company makes will be written off in the bankruptcy (Be careful however if your spouse is also named on the mortgage, as that person will become responsible for the full amount owing) or
- If practical, you may wish to retain the property if the extent if the negative equity is not great and you can afford to meet the monthly mortgage repayments
To retain the property and to protect it from future attack by creditors you can either:
- Transfer the "legal interest" to your spouse, or other person (by using a solicitor)
- If the mortgage company will not allow you to transfer the "legal interest" then it is possible to achieve a similar result by transferring the "equitable interest" (by using a solicitor).
You will remain responsible for repaying the full amount on all the mortgages if you retain the property.
If there is "nil equity" in the property and you wish to retain that property then you need to transfer the interest in the property by agreement with the Official Receiver. It is common practice that the Official Receiver will allow you to transfer the interest for a nominal amount of £1 plus the Official Receivers legal fees usually £300 or so.
If you have some equity in the property you need, first of all, to determine "your share" of the interest in the property (see "determining your share")
In a bankruptcy the Official Receiver (OR) or Trustee in bankruptcy will wish to receive from your spouse the amount of your share in the equity. On receiving such amount the OR will then consent to the transfer of either the "legal interest" and/or the "equitable interest" in the property. You are effectively selling your interest in the property to your spouse.
Should the transfer take place pre bankruptcy, it must be done via a solicitor using those documents referred to in "determining your share".
Should the transfer take place post bankruptcy, then the Official Receiver will instruct solicitors to act on his behalf.
A person who has been made bankrupt generally has 12 months from the date of the bankruptcy order is made to have his share purchased by his spouse. Should the interest not be purchased within the 12 month period, the Official Receiver or Trustee in bankruptcy is within his rights to apply to the court for a possession order. The house will then ultimately be sold at auction to realise the equity for the benefit of your creditors. The Official Receiver would then pay to the bankrupt spouse half of the sum realised, if that spouse had a half interest in the property.
As with all things early advice is important in order that you know exactly where you stand concerning the exact position as regards transferring the equity in your house either before or post bankruptcy.